Transformers as capital goods: credit depends on their use in manufacturing, not a narrow reading of plant.

Transformers were treated as eligible capital goods for Modvat credit under Rule 57Q because the controlling test is their use in the manufacturing set-up, not a narrow revenue-side reading of "plant". The analysis follows Supreme Court precedent that recognises transformers as devices regulating and altering electricity supply for manufacturing operations, and it rejects earlier Tribunal rulings denying credit as no longer good law after the binding precedent. Revenue reliance on those older decisions was therefore not accepted, and the credit claim stood allowed.

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Issues: Whether transformers were eligible for credit as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: Eligibility under Rule 57Q had already been settled by the Supreme Court, which held that the determining factor is the user of the item in the manufacturing set-up and not a narrow revenue-side construction of the word "plant". Transformers were treated as devices that regulate and bring about a change in electricity supply for the manufacturing process, and earlier Tribunal decisions denying credit on transformers were held to be no longer good law in view of the later binding precedent. The reliance placed by Revenue on older decisions was therefore not accepted.

Conclusion: Transformers were eligible for credit as capital goods, and the Revenue's challenge failed.

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